I have a request to make of members and of the officials in attendance from the Department of Transport, Tourism and Sport. Senator Ó Céidigh has a prearranged appointment with a Minister. He wishes to ask a question about this legislation. I ask that this question please be taken now. If it is appropriate, the officials can respond immediately or, alternatively, they could answer later in the session. Is that agreed? Agreed. I call Senator Ó Céidigh.
General Scheme of the Air Navigation and Transport Bill 2019: Discussion
I thank the members and officials for facilitating me. I have a prearranged meeting at 2 p.m. in the Department of Finance and, unfortunately, I will have to leave this meeting. I would very much like to stay because this is an area where I have a little experience but a lot of interest. The context of the air navigation and transport Bill 2019 derives from a European Union, EU, policy recommendation regarding the model being used in many European states. A significant part of the purpose of the Bill concerns the fact that the Irish Aviation Authority, IAA, has a dual mandate. It is involved in commercial air traffic control services and has a significant income from that aspect of its operations. The State is benefiting very much as a result. The IAA is also a regulator and sometimes as a result there can a perception, although not in this case, of a potential conflict or overlap in interests.
Overall, I welcome the Bill. It is very good. Going back to 2017, much work was done in this area, including the production of a national policy statement and the commissioning of a review of airport charges. This has been much stakeholder involvement in the process. I am aware of that background. My question is primarily from an aviation perspective. Representatives from a number of airlines have been in touch regarding the potential cost involved in this separation of functions. How much will it cost? Figures have been bandied about with suggestions that it might be as much as €80 million. Is it expected that the airlines, which will eventually mean the passengers, will have to pay that amount of money?
Perhaps the officials from the Department might be able to answer that question now?
Mr. Ronan Gallagher
Yes, although we might come back to this issue later during the contributions of other committee members. Estimates of costs are being thrown around the place and I am not sure where they have originated. We have not calculated a final cost but it will not be anything close to the figures mentioned. Essentially, all we are doing is redesignating existing functions between two organisations. We currently have two organisations and when we finish this process we will still have two organisations. What will have changed is the distribution of work and responsibilities. Whatever the associated additional costs, they will be incurred around the margins of the back office administration. It will be in no way material in the grand scheme of the charges that have been mentioned. We are working on the charging mechanism. It involves fees imposed on Irish air operator certificate holders, namely, Irish airlines and pilots. A great proportion of the fees also derive from en route and terminal charges for traffic control services that are regulated at European level. Some of the moneys associated with this mechanism should be recoupable through that process. That will further spread across the board whatever kind of marginal additional costs result from this process.
In answer then to the question of whether there will be cost increases, the answer is not necessarily but possibly. Over the medium term we expect the separation of these functions, which we will come to in more detail later, to result in much better services and a much clearer regulatory landscape. That will be worth the small charges in the long term. I do not see the associated costs being of an order that will be significant in the grand scheme of things, notwithstanding the fact that every penny extra is a problem for at least one of our Irish airlines.
I thank Mr. Gallagher and the Chairman.
Did the regulatory impact study quantify any costs?
Mr. Ronan Gallagher
We did that study at a point when we were not clear about the costs. The IAA is a company with an annual turnover of €200 million. We are talking about set up costs in this context of about €5 million to €6 million in the transition phase. The costs thereafter will be relatively small. They will involve changes in headcount, approximately ten extra staff, and that type of thing. Part of our deliberations will also involve the fact that there is a considerable cash reserve in the company by virtue of its performance over the last seven or eight years. That will also act as a buffer during the transition.
Senator Ó Céidigh's concern was that the industry might end up paying the costs.
My concern was that the costs might be very high. I agree with Mr. Gallagher. I do not know the foundations of the figures that have been doing the rounds. I thank Mr. Gallagher for clarifying that aspect. I was concerned that the aviation industry might have been caught if there were significant costs was involved.
It appears it will be a very marginal cost and not be a significant one. I appreciate that feedback.
I would make one further point about it and I raised this at a previous meeting on this issue. My sense is that Commission for Aviation Regulation, CAR, is currently pretty stretched. It would need significant resources to take on this extra responsibility. As Mr. Gallagher said, there will be a transition period. It will not be like switching on a light. There will be some degree of overlap from the IAA to the CAR and possibly a transition of staff because the knowledge and skill set is already there. I am not sure if Mr. Gallagher would like to comment on that?
Mr. Ronan Gallagher
The Senator has raised this point in other sessions. He is right that CAR, which is the economic regulator and the smaller of the two parties, has fewer than 20 staff, some 17 staff. Our view is that certainly on the consumer protection side it needs to increase its capacity. Part of the rationale for the merger into the bigger entity is that it will be a bigger regulatory body from an organisational perspective. The Deputy mentioned the cost issue and part of that relates to some commentators mixing up the cost of the restructuring and also the cost of that would involved in any event in investing across the board in consumer protection, legal, and aviation, safety and security capacities. The industry is growing and the regulator needs to grow with it. There is an element of some of the costs being assigned to that natural growth through this restructuring but they are not the same thing.
In the region of 37 million to 38 million passengers use Dublin, Cork and Shannon Airports, with 33 million using Dublin Airport and 2.5 million to 3 million using Cork and Shannon Airports. A staff of 17 or fewer than 20 to look after passenger rights is a big challenge. I am not here to act on behalf of CAR, rather I have been on the other side of the fence and I see the good work it is doing, particularly with respect to passengers and its fairness towards the airline industry. I appreciate what Mr. Gallagher is saying, namely, that it will get the resources it badly needs to look after passenger rights and also with respect to this transition, the cost of which will not be as significant as has been bandied around. I appreciate the Chairman facilitating me.
I appreciate the Senator has another meeting to attend.
I do. I thank the Chairman.
The Senator will have an opportunity when the legislation comes before us to provide us with whatever update he will have at time.
I thank the Chairman again.